Naum Morgovsky, 69, and Irina Morgovsky, 66, both of Hillsborough, California, pleaded guilty today for their respective roles in a scheme to export components for the production of night vision and thermal devices in violation of the Arms Export Control Act. Naum Morgovsky also pleaded guilty to laundering the proceeds of from the scheme.

Assistant Attorney General for National Security John C. Demers, Acting U.S. Attorney Alex G. Tse for the Northern District of California and Special Agent in Charge John F. Bennett of the FBI’s San Francisco field office made the announcement. The pleas were accepted by the Honorable Vince Chhabria, U.S. District Judge, during jury selection.

According to their guilty pleas, Naum Morgovsky and Irina Morgovsky admitted that from April 2012 until Aug. 25, 2016, they conspired to export without the necessary license to a company in Moscow, Russia, numerous scope components, including image intensifier tubes and lenses. They further admitted a coconspirator in Russia communicated to them lists of components necessary for the Russian business to manufacture certain night vision devises. The couple used their U.S. business, Hitek International, to purchase these components and misrepresented to the sellers that the products would not be exported. The couple then shipped the products to Russia and other countries in Europe where an associate arranged for them to be hand-carried into Russia. Further, the couple admitted the scope components they exported were on the U.S. Munitions List and that they therefore were not permitted to export the items without a license from the Department of State, Directorate of Defense Trade Controls. The defendants admitted they knew a license was required to export the components and that they did not obtain a license.

In addition to exporting the components, Naum Morgovsky admitted he took steps to conceal his crimes so that the couple could continue to run the illegal export business undetected. Specifically, he admitted he laundered the proceeds of the export crimes and used the name of a deceased person to conceal the fact that he was the source and owner of a U.S.-based account.

On April 27, 2017, a federal grand jury issued a superseding indictment charging the Morgovskys, along with Mark Migdal, 72, of Portola Valley, California, for their respective roles in three related schemes — the illegal export scheme resolved by today’s plea agreements, and two additional bank fraud schemes allegedly involving Naum Morgovsky. With respect to the illegal export scheme, the grand jury charged Naum Morgovesky with conspiracy to violate the Armed Export Control Act, and two counts of money laundering. The grand jury charged Irina Morgovesky with the conspiracy and with misuse of a passport. Pursuant to today’s plea agreements, the couple pleaded guilty all the charges with the exception of the passport charge pending against Irina Morgovesky — that charge will be dismissed.

On Nov. 10, 2017, Judge Chhabria severed the case to allow the illegal export charges to be handled separately from the allegations regarding the bank fraud scheme alleged in the April 27, 2017, indictment. The bank fraud charges are still pending against Naum Morgovesky. According to the indictment, Naum Morgovesky conspired with Migdal to defraud two federally-insured banks, now Bank of America and EverBank, by seeking those banks’ approval for a short sale of two condominiums. The condominiums were in Kihei, Maui, and were in the same building as a condominium that had been owned by Migdal. The indictment alleges Morgovsky and Midgal conspired to convince the banks to allow the properties to be sold in a short sale to an individual who was deceased. A short sale is a sale in which a lender allows a property to be sold at a price that is less than the amount owed on the loan. Morgovsky also is accused of submitting false statements to the banks about Midgal’s employment status and income. The indictment charges Naum Morgovsky and Migdal with conspiracy to commit bank fraud, and two counts of bank fraud, related to the sale of the Hawaii properties.

On July 25, 2017, Migdal pleaded guilty to his part in the conspiracy and to two counts of making false statements on loan and credit applications. On April 24, 2018, Judge Chhabria sentenced Migdal to 18 months in prison and ordered him to pay a $1,000,000 fine, to pay $460.215 in restitution, and to serve 3 years of supervised release.

In sum, the charges and maximum statutory sentences against Naum Morgovsky are as follows:

Count

Charge

Statue

Status

Maximum Sentence

One

Conspiracy to Commit Bank Fraud

18 U.S.C. § 1349

Pending

30 years; $1,000,000 fine

Two

Bank Fraud

18 U.S.C. § 1344

Pending

30 years; $1,000,000 fine

Three

Bank Fraud

18 U.S.C. § 1344

Pending

30 years; $1,000,000 fine

Four

Aggravated Identity Theft

18 U.S.C. § 1028A

Pending

2 years consecutive to any other sentence; $250,000 fine

Nine

Armed Export Control Act Conspiracy

22 U.S.C. § 2778

Pleaded Guilty

20 years; $1,000,000 fine

Ten

Money Laundering

18 U.S.C. § 1956(a)(1)(B)(i)

Pleaded Guilty

20 years; $500,000 fine or twice the value of funds involved

Eleven

International Money Laundering

18 U.S.C. § 1956(a)(2)(A)

Pleaded Guilty

20 years; $500,000 fine or twice the value of funds involved

The charges against Irina Morgovsky are as follows:

Count

Charge

Statue

Status

Maximum Sentence

Nine

Armed Export Control Act Conspiracy

22 U.S.C. § 2778

Pleaded Guilty

20 years; $1,000,000 fine

The maximum statutory sentences are prescribed by Congress and provided here for informational purposes; the sentencing of the defendants will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors.

A sentencing hearing for today’s guilty pleas is scheduled for Sept. 18. No date has been scheduled yet to resolve the remaining charges against Naum Morgovsky.

The prosecution is the result of an investigation by the counterintelligence squad of the FBI, with assistance from IRS-Criminal Investigation and the Department of Commerce, Bureau of Industry and Security.

The case is being prosecuted by Assistant U.S. Attorneys Colin Sampson and Erin Cornell of the Northern District of California, and Trial Attorney Jason McCullough of the National Security Division’s Counterintelligence and Export Control Section.